United posts $375M loss for April

United Airlines' parent UAL Corp. on Wednesday said it posted a $375-million net loss in April, when revenues were hit hardest by war in Iraq and the travel downturn from SARS.

Nevertheless, the carrier said it managed to meet the monthly financial targets set by its bankruptcy lenders.

UAL, which filed for the largest-ever airline bankruptcy in December, said it had an operating loss of $297 million in April. The company said it ended the month with a cash balance of $1.7 billion, up from $1.6 billion at the start of April.

"The revenue environment for the entire airline industry was very difficult for the month, due to the full impact of the war in Iraq and the fear of SARS (Severe Acute Respiratory Syndrome) in Asia," the company said in a statement.

UAL also said it met debtor-in-possession financing agreements, which required the carrier to have a cumulative earnings before interest, taxes, depreciation, amortization and aircraft rent (EBITAR) loss of no more than $849 million between Dec. 1 and April 30.

"Early planning for the effects of the war in Iraq and our new flexibility to respond to market shifts helped us to meet our cumulative EBITAR requirements and maintain a healthy cash position," United Executive Vice-president and Chief Financial Officer Jack Brace said in a statement. "We are confident at this point we will also meet our EBITAR requirements for May."

He said United's cash-burn rate was significantly higher in April than in March, but added that the market has since rebounded and its cash receipts have returned to pre-war levels.

Management at the airline is in the midst of a standoff with some of its creditors, who are unhappy with United's plan to create a discount airline, called Starfish, as part of its emergence from bankruptcy. The rift could jeopardize United's plans to exit bankruptcy early (Crain's, May 26).

Even though United last month secured Bankruptcy Court approval for labor concessions totaling $2.56 billion per year over the next six years--cuts that were key to avoid immediate liquidation--the fight over Starfish indicates the carrier hasn't expressed the strategy it will pursue to emerge from Chapter 11.